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Why Rigetti Stock is Up 2,800% and What Happens Next

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Key Takeaways

  • Rigetti's stock soared over 2,800% amid major contracts and quantum technology milestones.
  • The firm secured U.S. Air Force and Novera deals worth over $11 million combined.
  • Despite progress, falling revenue, higher losses and a lofty valuation raise red flags.

Rigetti Computing, Inc.’s (RGTI - Free Report) shares have gained more than 2,800% in the past year as investors showed excitement over its quantum breakthroughs. However, Rigetti’s weak fundamentals and lofty valuation raised doubts about its future growth trajectory and how investors should position themselves toward the stock. Let’s see in detail –   

What's Behind Rigetti's Quantum Leap? 

Rigetti's shares have soared over the past year as the company secured major contracts and made significant progress in advanced quantum computing technology. Rigetti's 36-qubit quantum system achieved 99.5% accuracy in key operations, marking a breakthrough toward developing a 100+ qubit chiplet-based system by the year's end. 

Rigetti signed a $5.8 million deal with the U.S. Air Force Research Laboratory to further develop quantum networking technology. It also received orders for two 9-qubit Novera quantum computing systems worth nearly $5.7 million, scheduled for delivery next year.  

Additionally, capital is pouring into the quantum computing sector, benefiting dedicated companies like Rigetti. JPMorgan Chase & Co. (JPM - Free Report) announced plans to invest about $10 billion in various innovative fields, including quantum computing. This has driven the stocks of quantum computing companies, including Rigetti, higher. 

Rigetti's Massive Gains — Boom or Bubble? 

Ongoing contracts and continuous breakthroughs in quantum computing may give Rigetti's stock the momentum needed to keep climbing. However, quantum computing remains in its early stages, and companies in this field require substantial funding for research and development. Rigetti recently completed a $350 million equity offering, providing the company with enough cash to continue operations and easing concerns about funding stability. 

Rigetti's business model also offers a competitive edge over rivals and positions it for growth once quantum technology becomes mainstream. The company has its own quantum processing units (QPUs), programming language and the Quantum Cloud Services (QCS) platform. 

Yet, it remains uncertain whether Rigetti can sustain its current explosive growth. The company's fundamentals do not fully support its soaring valuation. Rigetti's operating losses increased 24% year over year to $19.8 million in the second quarter, while revenues fell 42% to $1.8 million, citing investors.rigetti.com.  

Furthermore, Rigetti faces stiff competition from larger players like Alphabet Inc. (GOOGL - Free Report) and International Business Machines Corporation (IBM - Free Report) , making it a potential takeover target. Additionally, Rigetti's forward price-to-sales (P/S) ratio is an astronomical 1,348.30, compared with the Internet - Software industry's 6.28. This indicates the stock is vulnerable to a broader market correction.   

Zacks Investment Research

Image Source: Zacks Investment Research

Overall, RGTI stock shows signs of being a bubble that could eventually burst. Risk-averse investors should steer clear of the stock, as it remains a speculative investment. Risk-takers may choose to capitalize on the potential growth opportunities. Currently, Rigetti has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

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